Understanding Home and Contents Insurance
Home and Contents Insurance Explained. 5 Frequently Asked Questions and Common Concerns.
The first thing we need to clarify is that home and contents insurance are actually two separate policies that combine the features of both. Home insurance covers financial losses associated with damage to or loss of the building itself, and may also be referred to as ‘building insurance’. Contents insurance covers financial losses caused by the theft, loss or damage of your possessions.
1. How do I choose the right Home and/or Contents Insurance cover?
Choosing the right home and/or contents insurance can give you a great sense of peace of mind, but understanding exactly what is and is not covered is crucial if you want to protect your most precious asset – your home.
For your home insurance, the first thing you need to consider is whether you want ‘total replacement’ cover – which covers the cost of rebuilding your home exactly as it was, or ‘sum-insured’ cover – the most common type of home insurance which covers your home (building) up to a set amount.
Always shop around for the right level of cover to suit your individual needs, and where possible use comparison tools and calculators available to help you make an informed decision. We recommend trying a few online calculators as the results can vary from company to company. Generally, the more questions asked by the calculator, the more accurate answer you will get to know how much to insure for.
With your contents insurance, it’s a good idea to go through each room in your home and conduct an audit of the items you have in each room and what the approximate value is of each item. A good tip to remember when you’re doing this is to make sure you open your cupboards and think about the food in the pantry or the clothes in your wardrobe – all these items could add up to quite a bit.
2. What is covered by default?
It is important to know that each insurance policy is different and the finer details should be thoroughly examined with your circumstances in mind, but there is also a generally accepted ‘level of cover’ that all home and content insurance policies cover. These include:
- Third party liability – if your guests injure themselves on your property you are usually covered to some degree
- Cost of alternative accommodation and storage (if your house becomes unliveable due to flooding for example)
- Replacement keys and locks (in cases where your home has been broken in to)
- Damage to satellite dishes and television aerials (this includes stereo and TV equipment)
- Loss of food (for example if your freezer breaks down)
- Theft of cash (the maximum amount varies and should be discussed with your insurer)
2b. And what isn’t covered?
If you ever need to rebuild from scratch then you are not only paying for the costs of labour and materials, you will also be facing a range of ‘supplementary’ costs which may include but not limited to:
- Architects and/or professional designers and planners
- Services to make your land/house safe for those working on the property
- Removal of debris from the site
- Council applications and local government lodgement costs
You will need to discuss these ‘supplementary costs’ with your individual insurer and make sure you are understand exactly what you are and are not covered for.
3. Can I specify additions and restrictions to my Home and Contents Insurance policy?
Known as ‘Optional Extras’ – most home and contents insurance policies include these, and it is up to you to determine exactly what is and isn’t considered optional.
We thoroughly recommend that you discuss your individual needs with your insurer and read all relevant documentation to ensure your cover is right for you. For example, you may want to increase your cash cover to $10,000 as well as paying extra for accidental damage. Most insurance firms provide limited ‘accidental damage’ cover but again we recommend discussing this with your insurer to determine exactly what is and what isn’t covered under their policy.
4. Are there exclusions to what I am covered for by default?
In some cases yes, there are limits put on how much you can claim. Often this relates to cash and contents where you cannot prove the amount and so you can only claim a ‘default return’. There is also a limit on how much you can insure high value items for. If you own a $25,000 diamond ring for example, you may want to speak with your insurer about additional and potentially specified term cover.
Other exclusions include (but are not limited to):
- Losses due to theft where you have lost keys (unless there are signs of forced entry)
- Damage occurring when your house is unoccupied for a period of time
- Replacement of an entire ‘suite’ in cases where only one section is damaged
- Again we strongly recommend that you speak with your individual insurer and read through your policy documents to ensure what you are and are not covered for.
5. How do I make a claim?
You will want to contact your insurer over the phone or online and advise them of any loss and/or damage immediately. You may need to fill in a claim form, but it is always best to speak to someone first.
- Be honest! Speaks for itself, but the more details about the incident you can include the easier it is for the claim process to run smoothly.
- Keep any and all supporting documentation, from all sources – Police reports, witnesses’ details etc – and last but not least – cooperate with all assessors and investigators at all stages of the process.
Any advice provided is general only and may not be right for you. Before you purchase an insurance product you should carefully read the Product Disclosure Statement to decide if it is right for you.